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Nobel laureate: 'Inclusive institutions key to nations' economic success'
DW (English)
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11/4/2024
Why do some nations succeed and some fail? Economics Nobel Prize winner James A. Robinson has spent his career trying to answer that question. DW's Janelle Dumalaon sat down with him to find out more.
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00:00
Why do some nations succeed and some fail?
00:09
Economics Nobel Prize winner James A. Robinson has spent his career trying to answer that
00:13
question.
00:14
I spoke to him at his home in Chicago to find out more.
00:18
Congratulations on having won the Nobel Prize for Economics.
00:21
At the risk of being, I don't know, the one billionth person to have asked you, how do
00:25
you feel?
00:26
I was a little shell-shocked for the first few days, actually, I have to say.
00:31
It was a sort of out-of-body experience.
00:33
I wasn't really thinking about it.
00:37
But obviously it's kind of marvelous.
00:41
What's been so nice is just talking to so many students and colleagues and like so many
00:46
other people, kind of happy, seeing other people happy about, not about me, but about
00:52
the ideas and about the research.
00:55
So that's been very rewarding, I have to say.
00:59
Now to someone who might not be familiar with your work, how would you explain what you've
01:04
been doing and what got you the prize, sort of this relationship between colonial strategies
01:09
and how institutions developed and economic prosperity?
01:13
We were fundamentally, you know, 30 years ago, we were fundamentally interested in understanding
01:17
these massive differences in prosperity around the world.
01:21
And we thought that economists were just not thinking about this in the right way and
01:26
they weren't kind of using the right concepts to think about this.
01:30
So the main idea that we developed is that this is really related to the institutions
01:36
of different societies and how people themselves kind of organize their societies.
01:41
And by institutions, I just mean the rules that create incentives and opportunities for
01:45
people.
01:47
And if you look around the world, you see these huge differences in these institutions.
01:51
But where did those differences come from?
01:53
And then to us, just talking about it, this wasn't anything that economists talked about
01:58
30 years ago.
02:00
Colonialism obviously had to have a big, had to be a big part of that story.
02:04
You know, many of these societies were shaped profoundly by colonialism.
02:08
So then we started investigating the role of colonialism in creating institutional variation
02:14
in the world historically and the extent to which that really accounted for these differences
02:19
in prosperity today.
02:21
You talk about the difference between inclusive and extractive institutions.
02:26
Inclusive institutions having set up nations more for success than extractive ones have.
02:31
What is the difference?
02:32
Yeah, so that's a dichotomy.
02:35
It's sort of simplistic.
02:36
Obviously, the world is full of shades of gray, but it's very useful for sort of understanding
02:40
the kind of approach that we say inclusive institutions are institutions that create
02:45
broad-based incentives and opportunities for people.
02:49
And extractive institutions concentrate incentives and opportunities in the hands of a few people.
02:56
And so that's crucial for prosperity because what drives economic growth and economic development
03:02
is innovation.
03:04
It's people's creativity and talents and, you know, you don't know where that is.
03:09
You don't know where those people are in society.
03:11
You don't know where the innovators are, where the entrepreneurs are.
03:14
And so you need to create a set of institutions that allows all that talent to come to the top.
03:21
But we also currently have this ongoing competition in Latin America, in Asia, in Africa.
03:28
You have countries like the U.S., Russia, and China sort of jockeying for influence
03:33
in these places.
03:34
How do you apply your theory to that phenomenon?
03:38
You know, the way our theory works is there are moments in world history where, you know,
03:43
whole continents get reshaped by colonialism or these sort of global forces.
03:48
And then we put a lot of emphasis on the kind of internal dynamics, internal political dynamics
03:54
of societies.
03:55
You know, we're often accused of not having a really good, well-articulated theory of
03:59
international relations.
04:01
You know, the way I look at it, you know, which comes a lot from my experience of working
04:06
in the global south, is that, you know, many people still see, you know, the United States
04:12
or the Western powers as colonizers.
04:14
You know, like, Western powers come, they tell you what to do, you know, they kind of,
04:19
you know, they boss you about.
04:20
They say, if you do this and that, we'll give you money.
04:23
You know, what you should really do is, like, be more like us, you know.
04:27
And that's very annoying for people in the global south, I would say, you know.
04:33
And I'm not sure it's such a bad thing if there was a rebalancing of that, you know.
04:38
So I think the rise of China, of course, has created a sort of idea that, you know,
04:43
there's going to be a different world system.
04:44
I'm not quite sure that's actually going to happen, because, you know, my own view about
04:49
Chinese economic growth is, you can't actually have a modern, innovative economy under a
04:53
totalitarian dictatorship.
04:55
There's no precedent for that in world history.
04:57
And I think you see lots of mechanisms for why that's not going to happen.
05:00
Look at Jack Ma.
05:01
You know, Jack Ma, you know, one of the symbols of Chinese economic success.
05:05
What happened to him?
05:06
He was cancelled.
05:08
He disappeared because he criticized the government.
05:09
You can't have a society like that.
05:11
You can't have a modern, innovative society like that.
05:14
So I don't think the Chinese really have the political foundations to be economically successful.
05:19
So of course, the scale of China is so impressive that, you know, it's difficult not to be carried
05:24
away by it.
05:26
But I'm old enough to remember when the Soviet Union was an economic success story.
05:30
You know, we learned when we were at school, high school, university, Russia was going
05:36
to be the future.
05:37
You know, now you tell young people that they don't know what you're talking about.
05:40
You know, there's nothing left in Russia except natural resources.
05:44
But I think, you know, we point out in the book there's many experiences in world history
05:48
like China where you have, you know, periods of very rapid economic growth in particular
05:53
circumstances, you know, but you can't extrapolate that into the future.
05:58
You know, we call it extractive growth.
06:00
So that means, you know, I think it would probably be a good thing to rebalance the
06:04
world system, you know, to stop this hegemony of Western powers in international institutions
06:10
and everywhere.
06:12
But I'm not sure it's going to happen, actually.
06:15
Taking your definition of institutions being a set of rules and incentives, how would you
06:20
rate the institutions of the United States today?
06:24
Well, you know, I still see, you know, there's huge elements of inclusion, you know, in the
06:29
sense that United States, you know, for me the biggest edge in, you know, economic edge
06:34
the United States has had for the last 200 years is this ability to suck talent out of
06:40
the rest of the world.
06:41
You know, think about Elon Musk, where did Elon Musk, where was Elon Musk born?
06:45
South Africa.
06:46
You know, Steve Jobs.
06:47
Where did Steve Jobs' father's family come from?
06:49
Syria.
06:50
You know, Sergey Bin.
06:51
Where's he from?
06:52
Russia.
06:53
You know, like, so that's still going on, you know.
06:55
So that's still going on.
06:56
Obviously, look at all this innovation in AI and, you know, digital, you know, so that
07:02
kind of machine is still going there.
07:04
But I think what you've seen in the United States, and of course, you know, much of the
07:08
other stuff is there too, the long shadow of slavery, you know, and discrimination and
07:13
racism in this country, the marginalization of indigenous people, that's all there too,
07:19
you know.
07:20
So, but I think what you've seen in the last 50 years is this is all coming off the rails
07:24
in many ways.
07:25
You know, that most Americans are not better off now than they were 50 years ago.
07:30
That's a fact.
07:31
You know, social mobility has slowed down dramatically.
07:35
There's been a massive increase in inequality, you know.
07:39
So that's challenging all the institutions today.
07:41
Look, you know, probably next week we're going to elect a president who doesn't respect institutions,
07:47
who basically tried to fix the last election in his own favor.
07:51
So that's a massive challenge to inclusive institutions in this country.
07:56
But you know, the way I think about that is that's because of the failures of the system,
08:01
you know, that the system, the democratic system has failed to adapt to globalization,
08:07
to technical change.
08:08
It's failed to kind of listen to people's problems, you know.
08:12
I do think in Why Nations Fail, what we show is that, you know, the U.S. institutions have
08:16
been challenged many times.
08:17
You know, if you look historically, you see in the 19th century, these robber barons,
08:22
Vanderbilt, Rockefeller, you know, they definitely challenged institutions.
08:27
They tried to undermine the political system, you know.
08:30
But the system managed to fight back.
08:32
People managed to fight back.
08:34
And I think at the moment, we don't know if that's going to happen.
08:38
You know, we're in the middle of a kind of very historic moment.
08:41
I think in the past, you know, we show there are many moments like this.
08:45
But somehow the system has come back on the rails.
08:49
Will it come back on the rails now?
08:50
I don't know.
08:51
You know, we also talk about many examples where inclusive institutions and inclusive
08:55
societies became more extractive.
08:57
You know, Venice is our sort of leading example.
09:00
Venice was probably the richest part of the world in the late Middle Ages.
09:04
And then everything went into reverse.
09:06
You know, all the inclusion in the economic sphere and the political sphere.
09:09
So could that happen here?
09:10
Yes, of course it could happen here.
09:12
When you see Donald Trump, and he could very well be the next president of the United States,
09:18
you talk a lot about the importance of institutions.
09:20
And this is someone whose supposed agenda is to remake government, is to overhaul institutions.
09:27
What do you think will happen if all this comes to pass?
09:30
Like, what does that say about the fortunes of this country?
09:34
Well, I don't think President Trump is in favor of changing institutions.
09:38
I think he's in favor of destroying and personalizing institutions, actually.
09:42
I think it's an impulse you see all over Latin America.
09:44
It's been going on in Mexico for the last few years.
09:47
You know, it's a very common sort of scenario.
09:50
So I think, you know, he'd like to undermine institutions.
09:54
And he doesn't like institutions.
09:55
He wants to personalize everything.
09:57
He wants to make everything discretionary.
09:59
And so I think that's going to be a disaster for this country, honestly.
10:03
It's going to be a calamity.
10:05
You know, can we survive that for four years?
10:08
I don't know.
10:09
Federalism, you know, helped us last time.
10:10
It saved us last time.
10:12
He tried to interfere with the counting of votes.
10:14
But he couldn't really do that because the federal government can't really do that, you
10:18
know.
10:19
So the federalism is very important, you know.
10:22
And you know, if you go back to the founding of the United States and the writing of the
10:26
Constitution, James Madison, these people understood this.
10:29
You know, the Constitution wasn't designed for, like, Barack Obama, you know, like some
10:33
really nice person.
10:35
Well, the Constitution was designed for somebody who wanted to destroy it, you know.
10:39
That's why there are these checks and balances.
10:41
That's why there are these separations of powers.
10:43
That's why there's federalism, you know, because of people like this.
10:48
And that's happened before, as I said.
10:49
And we survived.
10:50
Are we going to survive it now?
10:51
You know, I was impressed when President Trump was sort of removed from power by people's
10:57
willingness to kind of act in favor of the country's welfare, even when their own jobs
11:04
and livelihoods were on the line.
11:05
You know, people were willing to kind of work with the institutions and to support
11:11
them and believe in them.
11:12
And I think that's what we're relying on now.
11:14
You know, already they're burning ballot boxes, you know.
11:16
So people are—whatever happens, you know, if President Trump loses, he's never going
11:20
to accept the result.
11:21
And then I think, you know, many people are concerned about violence and sort of political
11:25
instability.
11:26
And, you know, we also—what we don't know, I think, is what's really happened to the
11:32
Republican Party.
11:33
You know, like, I'm emphasizing we're talking about President Trump.
11:36
But I first of all started talking about the social problems in this country.
11:39
You know, let's not forget the social problems.
11:42
That's why President Trump is so powerful, that he understood that these people felt
11:47
that they were not being listened to and not represented in the political system.
11:52
And you know, he was clever enough to understand that.
11:54
The Democratic Party didn't understand it.
11:56
So those problems, you know, if those problems don't go away, this type of politics may not
12:02
go away.
12:03
So you need to step up to the plate, you know.
12:06
And you're not going to step up to the plate if you're complacent and don't recognize the
12:09
challenges.
12:10
Thank you very much, Professor James Robinson.
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